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Credit Cards Bad Credit

David Warner

David Warner

Financial Advisor

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In the credit industry, there are dozens upon dozens of types of credit cards that people may apply for. Chances are, the ones you see on commercials or internet advertisements look so enticing and intriguing that you wish you could apply. However, you see that the minimum stated credit score is well into the 700s. The reality is, not everyone can qualify for the best possible credit cards. Sometimes, people make poor financial decisions or live their life with poor credit habits that have led them to having bad credit.

Now, if you have bad credit and are reading this article, you are half-way through the battle. The truth is, many people deny their finances and can’t accept that they have bad credit. Having bad credit can be discouraging; however, you must realize and be open to seeing the opportunities of improving your credit score.

In this article, we are going to discuss one of the best ways to fix bad credit and, ironically, we are taking about credit cards for bad credit. We will explore exactly what is bad credit, how you can fix it with a credit card for bad credit and a few tips to help you along the way.

 

What is Considered Bad Credit

One of the most loaded questions that any credit holder can ask is: what is considered bad credit? The truth is, the answer is the eye of the beholder. Depending on who you ask, you will get varying degrees of answers. Reason being, no matter what an individual’s score may be, they may consider it to be bad. In our opinion, if you are ever planning on doing anything great with your credit or improving it beyond the 800 markers, you must adapt a new positive and confident attitude and perception.

Now, there are a few measures that can help us gauge bad credit by technicalities. Typically, anyone with a credit score under 600 is considered to be categorized as “bad credit”. Since there are a few different credit score systems, the best way to know whether your credit is considered bad is to see how close your credit score is to the first hundred numbers of the credit score system. On top of that, an individual who has many negative marks, delinquencies, bankruptcies, or other poor financial decisions attached to their credit report may be designated as “bad credit holders”. While this may be a tough cookie to digest, understanding why you have bad credit is the key to moving forward.

Understanding Why You Have Bad Credit

As we said above, knowing that your credit is considered bad can be difficult to believe and digest. However, once you can admit previous poor financial decisions – or that you are merely starting to build credit, it can make the process to improving your credit much, much easier. In our opinion, the best way to accelerate the process of understanding why you have bad credit, you must get a copy of your credit report. If you didn’t know, you can receive an annual copy of your personalized credit report every year, once a year, for free. Once you receive this document, it will shine light on a few areas that can impact your credit score. We are going to share a few things to look out for:

  1. Negative Marks – Do you have any negative marks on your credit report? These would show up if you have ever missed a payment or defaulted on past loans. You may also have received a negative mark if you have filed for bankruptcy in the past. These marks are significant and hold great value over your credit score.
  2. Inquiries – Inquiries are smaller marks on your credit report that can leave lasting impacts if not taken care of. These are only allowed to be reported on your credit report for a maximum of two years. Take the time to look at both hard and soft inquiries to ensure they are up-to-date. This will help improve credit score by a few points.
  3. Credit Utilization – What is your credit utilization based on your credit report? How much credit have you used compared to how much you have taken out? If you are quick to spend credit, chances are, your credit utilization is very small, meaning you have no credit left.

In almost every single case, credit holders with bad credit are well aware of their bad credit. Rather than find faults in your credit, there are many opportunities that lay ahead. One of the best ways to fix bad credit is through opening a credit card for bad credit.

 

3 Steps to Getting a Credit Card

To better help out individuals that are seeking how to specifically get a credit card for bad credit, we have created a simple and fool proof three step method to getting a credit card, even with bad credit. Here is how it works:

Research

The first step to do research. The reality is, no matter what your credit score is, you need to do research. We suggest taking the time to research different credit card companies and their credit cards that are designed for individuals with bad credit. You should look at interest rates, fees, and what deposits they may charge for individuals with bad credit. Yes, if you are wondering, for individuals with bad credit, companies may ask for a nominal deposit, which is technically known as a secured credit card, which we will talk more about below.

Call

The next step in our 3 steps to securing a credit card for bad credit is to book an appointment or to schedule a call with a specialist with the credit card company. We firmly believe that, while many company believe you should apply online for a credit card, we see past this approach as informal. You want to be taken seriously. Take the time to speak with a representative and specialist. We advise to write down all questions prior to meeting. This is the best way to ensure all of your questions get answered and you are clear about what to expect. At the same time, this shows a level of respect and professionalism to the lender. 

Sign the Contract

If you have made it through step two without any unanswered questions or doors closed, then its time to sign the deal. You have performed the researched, found the best possible credit card for bad credit for you, met with the company to learn more about their specific card, and now it’s your turn to capitalize. This is a major step towards improving your credit score and you should be proud of yourself. Always stay on-top of your payments and be sure to never, ever miss a payment again!

Can Secured Credit Cards Help?

Say you have been denied a credit card for bad credit; however, the bank decides to offer you the opportunity of a secured credit card. You might be wondering, can secured credit cards help your credit score? Typically, secured credit cards are a fantastic way for individuals with bad credit to begin rebuilding or establishing better credit. To open a secured credit card, banks will require a refundable deposit, which will be established as your credit limit. Typically, these accounts will not offer the benefits or features of a regular credit card, excluding annual fees. Now, these accounts will not require a credit check as, in order to open the account, you must provide the bank with the credit limit as a deposit. Moreover, there are a few words of caution for those who open these accounts. Secured Credit Cards can be a great opportunity for credit holders; however, the fees are a bit higher. At the same time, some banks will not report secured credit cards to all three bureaus – be sure of this before you select an institution.

 

5 Ways to Improve Credit Score

Credit Report Disputes

One of the fastest ways that anyone can improve their credit score is through pulling their own credit report. We highly suggest that every single individual, regardless of their credit score, performing this task. You are able to receive a free copy of your credit report each year – so why waste it! Take the time to really analyze the entire report, line-by-line. Figure out what areas are confusing, what doesn’t make sense, and, most important, highlight any mistakes. It’s your responsibility to inform the credit bureaus when something is wrong – otherwise, it will continually impact your credit score. For example, are there any inquiries on your report that are longer than two years? If so, you need to request to remove these, especially if they are hard inquiries.

Balance Credit Utilization

Credit utilization is one of the important credit concepts that are impacting your credit score. As we discussed earlier, this is a critical component that you must take into consideration when reviewing your credit report, and as you move forward. Most people who have great credit are well aware of their credit utilization and use credit as a means to balance their utilization to maximize their efforts and credit score number. With that being said, if you are planning on improving your credit score, you must take the time to balance your credit utilization better. This may mean using your credit cards less or paying down the principle faster with larger monthly payments.

Pay on Time – In full

Aside from learning how to dispute your credit report, one of the fastest ways to improve your credit score is through paying your bills on time, and paying statements in large, full balance payments. This is truly the only way that you can secure your credit score keeps going up – otherwise, with interest rates and other variables, your credit score number is volatile. By paying on-tie and paying off balances in full, each month, you are contributing to over 65% of your credit score. Some financial gurus will say that if you can’t afford to pay off a credit card balance, don’t use it. However, the majority of society has accrued a few thousands of dollars of credit card debt. So, if you can pay more than the minimum payment – do it!

Credit Mix

Your credit mix has always held a very important role in establishing your credit score. However, in recent years, the idea of balancing a great mix of credit has risen in importance and more and more people are talking about it. Did you know that over 10% of your entire credit score can be attributed to what types of credit accounts do you have? Take the time to look at your credit profile and break down the varieties of credit streams that you have. One of the best type of credit accounts to mix in your report is installment loans. These will help give your credit an extra boost over time as they are known as credit builder loans or agreements. Do make sure you are careful though when opening more than one type of account, which leads us to number 5!

One Card at a Time

Before you are quick to open multiple credit cards, we want you to understand the importance of focusing on one card at a time, especially with bad credit. You see, typically individuals with bad credit do not have the financial knowledge or capacity to handle multiple credit cards, all of which can lead to further debt and the worst-possible credit score. So, don’t apply for multiple cards at once and only focus on improving your credit score one credit card a time, for now.  If you didn’t know, every time you apply for a new credit card or loan, your credit score and report will show this change and application in a negative manner, resulting in a few points lost. Take this time to learn more about finances and credit, how to create a stable budget, and more about debt. Once you feel confident and can officially handle more credit accounts because of your budget, then you could consider starting to mix your credit lines.